ArcelorMittal

Blast from the past

France’s president threatens to nationalise a steelworks

A SENSE of déjà vu struck France this week, as a Socialist government threatened to nationalise a steelworks to stop a multinational company from closing part of it. Cue memories of the early 1980s, when François Mitterrand took banks and industrial companies into public ownership. This time a threat by Arnaud Montebourg, the firebrand industry minister, was reinforced by François Hollande, the first Socialist president since Mitterrand. Before a meeting on November 27th with Lakshmi Mittal, the boss and main shareholder of ArcelorMittal, the world’s largest steelmaker, Mr Hollande said that nationalisation was “on the agenda”. Politicians across the board also supported temporary state control.

Like many other steelmakers in an industry plagued with overcapacity, ArcelorMittal is hurting. It wants to close two uneconomic blast furnaces at Florange in Lorraine and concentrate its French steelmaking at its coastal sites at Dunkirk, on the English Channel, and Fos-Sur-Mer, on the Mediterranean. But it wants to keep its rolling mills at Florange. Mr Montebourg says that buyers for the threatened furnaces can be found only if the whole site is put up for sale: he told the French parliament on November 28th that he had one prepared to invest €400m ($520m) to renovate Florange. Hence his plan for temporary state ownership while a deal is tied down.

ArcelorMittal says it needs the rolling mills (which employ 2,000 people, compared with 629 at the furnaces) to process slabs of steel from Dunkirk. Ceding the rolling mills to the state would thus interfere with its overall business in France, which employs 20,000 people at 150 sites, a third of its total in Europe.

The contested takeover of Arcelor by Mittal in 2006 was opposed by the then French government, forcing the Indian businessman, based in London, to make undertakings to keep steelworks open. Mr Mittal is now accused of breaking promises, but the small print of the deal makes clear that they depended on the market outlook remaining favourable.

It hasn’t. ArcelorMittal enjoyed two great years after the takeover but its fortunes have tumbled with Europe’s economy. Its main European plants lost $823m in the first three quarters of this year; nine of its 34 blast and arc furnaces are idle, and four more (two in Belgium, plus the two at Florange) are due to be shut for good. The steelmaker, which has $23 billion of net debt, has seen its credit rating downgraded and has had to shed assets.

A century ago, when Lorraine sat on the world’s largest iron ore deposits, Florange was at the heart of the world’s steel industry. By the 1960s, however, better quality ore from Brazil and Sweden was the raw material of choice. That turned the industry on its head: steelmakers started building large integrated works on coasts to receive ships full of ore and limit transport costs. Florange’s furnaces are but the latest casualties of that change.

The president may have gone into this week’s meeting with nationalisation on his lips to put pressure on ArcelorMittal, but afterwards his tone changed. A statement from the Elysée palace, agreed by the government and the company, mentions working together to safeguard the jobs involved. ArcelorMittal’s deadline to pull the plug on the blast furnaces at Florange was November 30th if no buyer could be found. As The Economist went to press, however, it seemed both sides were willing to keep talking. Those furnaces may flicker on for a while.